April 28, 2017
The world’s economic leaders and stakeholders came together at the 2017 IMF and World Bank Spring Meetings amid a more positive outlook on the global growth, which is forecast to hit its fastest pace in five years. A clear theme running through the meetings was the need to protect the growth momentum, given policy and political uncertainties, and to help ensure that everyone has the opportunity to share in the fruits of global integration and technological progress.
More than 10,000 people took part. In addition to central bankers, finance ministers and other officials, the meetings drew around 650 journalists, 160 parliamentarians from 68 countries, and a record 850 civil society representatives, who gathered to learn, listen, and share their points of view.
The always popular program of seminars provided one such forum for opinion makers to discuss the hot topics of the day. Below are some key moments from each seminar.
Technological advances eliminate the need for some jobs, but won’t make human work obsolete, said Walter Isaacson, the head of the Aspen Institute, an educational and policy center. His discussion with IMF Managing Director Christine Lagarde was the first in the series of seminars focusing on how innovation affects the economy and people’s lives, and how to adapt to change. Institutions like the IMF have a major role to play in helping to shape policies to cope with the disruption, they agreed.
Drawing on examples from his recent book, The Innovators: How a Group of Hackers, Geniuses, and Geeks Created the Digital Revolution, Isaacson said that “innovation is a team sport.”
Rather than viewing humans and technology as locked in a zero‑sum game, he said, it is more productive to recognize the great advances of our time—the microchip, the computer, and the internet— have arisen from collaboration.
“Every great innovation is done in a collaborative way between humans and machines; between teams of people, the government, and academia,” Isaacson said.
There’s no question that new financial technology – FinTech, in geek-speak—transforms the way we spend, save, and invest our money and trade securities. There remain unanswered questions: how radically, and how quickly, will financial services, markets and regulation be transformed? What will banking and securities trading look like in three to five years?
Those questions were put to a panel of tech executives, regulators, lawyers, and bankers who make up the IMF’s new High Level Advisory Group on FinTech. In the discussion, moderated by IMF Deputy Managing Director Tao Zhang, most panelists agreed that blockchain technology and artificial intelligence will transform banking just as the internet transformed retailing, entertainment and the news media. While the technologies won’t make banks obsolete, they will put some banks out of business, and force others to adapt their business models. Many banks are likely to form alliances with the new technology-driven providers of financial services.
In this seminar, panelists discussed the promises and challenges of advancing digital financial inclusion in sub-Saharan Africa from two different country perspectives, Nigeria and Tanzania.
Mobile startups are changing the financial landscape in Africa. Nigeria’s Paga offers consumers financial services, such as money transfers and payment systems, through their mobile phones, offsetting the cost of providing conventional banking services, which is prohibitively high.
“We have a wider reach than all 23 banks in Nigeria put together,” explained Tayo Oviousu, founder of Paga.
Tanzania has also seen a sharp increase in mobile money services, with more than 12 million Tanzanians using mobile platforms to save money and apply for credit.
“Fast forward to the future and you land in Tanzania as far as technology is concerned,” said Benno Ndulu, governor of the Central Bank of Tanzania.
Panelists said emerging market economies face significant challenges. Tighter US monetary policy, a stronger dollar, heightened uncertainty in the euro area, a rise in economic nationalism and trade protectionism, and a rollback of financial regulation, could cloud the growth outlook.
Many emerging markets have already adopted strong economic policies, panelists noted. But policymakers must resist the emerging idea that international relations are a zero-sum game, said Sri Mulyani Indrawati, Indonesia’s Finance Minister. Otherwise countries will act in their own interest rather than working toward prosperity together.
Mauricio Cárdenas, Colombia’s Finance Minister, echoed this view when asked about the possible effects of scaling back international financial regulation. While adopting strong regulation comes at a high cost, he said, it is essential. The worst possible scenario would be for emerging markets to comply with the Financial Stability Board rules and advanced economies to abandon them, potentially generating a crisis. “We need to avoid a ‘race to the bottom’—everyone has to be on board.”
Emerging economies can guard against risk by getting their houses in order, the IMF’s Zhang said. “Vigilance will be key.”
How do we take the gender challenge one step further? An introductory video highlighting the challenges women face globally set the stage for the wide-ranging discussion by the panel on practical measures needed to increase women’s economic empowerment.
“Gender is not a trivial topic for the IMF,’’ Lagarde said, explaining how the IMF is incorporating gender analysis and advice on specific policies in its annual consultations with member countries. “The fastest road to an inclusive, more equal, and diversified economy is investing in women,” she said.
“It’s good for business and it's the right thing to do,” said Muhtar Kent, chairman and CEO of the Coca-Cola Company. Coca-Cola has launched an initiative aimed at empowering five million women entrepreneurs globally over the course of this decade.
Norway’s Minister of Finance, Siv Jensen, said that flexible policies toward parental leave, work hours, and affordable child care have helped close the gender gap in Norway.
The global economy is still in many ways “rigged against women,” said Winnie Byanyima, Oxfam’s executive director. "Institutions like the IMF can bring the change we need for women,” she said.
The global economy is gaining momentum, but can it be sustained in the face of economic and political risks?
“Markets have a benign view,’’ said Axel Weber, Chairman of the Swiss financial services company UBS.
In advanced economies, very low growth, inflation and interest rates are here to stay. In this environment, the unequal distribution of gains from technology and trade gives rise to public discontent, said Weber.
And while emerging and developing economies are in a better place than before, they are not yet where they need to be, said Masood Ahmed, president of the Center for Global Development. Those economies need to invest in innovation and ensure an open trade system to continue to grow, panelists agreed.
Raghuram Rajan, professor of finance at the University of Chicago’s Booth School of Business, argued for a slightly different tack in dealing the public discontent with globalization.
“Some people have in mind a “bicycle sense” of the global system: unless you pedal forward, you are going to fall off. There are some instances where it makes sense to pause, take stock, figure what are the things that don’t work and then go forward."
Sub-Saharan Africa remains a frontier for growth with seemingly boundless potential. But the region faces a broad-based slowdown that has resulted in a decline in per capita income for the first time in 20 years.
The slowdown is broad based and imbalances have accumulated, IMF Deputy Managing Director Mitsuhiro Furusawa said. In response, countries should adopt more flexible exchange rates, rein in public debt, and boost infrastructure spending.
Cameroon’s Finance Minister Alamine Ousmaine Mey said the region needs to “re-engineer its development tools.” This will mean moving from government-led public investment to more private-sector led investment.
“All the measures we are talking about are useless if execution is not properly done,” he added.
Panelists stressed the need for home grown solutions.
Throughout much of its history, discussions on the role of the special drawing right (SDR) have focused on its function as an official reserve asset. The inclusion of the Chinese renminbi in the SDR basket and issuance of SDR-denominated financial instruments in China have raised questions as to whether it could play a broader role as a denomination for financial instruments or as a unit of account for commodity prices and trade invoicing.
Without the SDR, the monetary system would become more fragmented, with increased self-insurance and liquidity risks, said Mohamed El-Erian, chief economic adviser at Allianz SE, a German financial services company.
“If you just rely on some central bank subsidy, it never will work,” said Yi Gang, deputy governor of the People’s Bank of China.
“We believe there’s a market need and there’s a market drive that can be sustainable to developing an SDR market,” said Gang. You can also watch the seminar's webcast.
What will the force look like in 2050 as aging continues and working-age populations start to shrink? In this seminar, panelists explored the various policy options to address the challenges of demographic changes around the world.
“Is demographics destiny? The answer is no,” said Catherine L. Mann, chief economist at the Organisation for Economic Co-operation and Development.
“Demographics is amenable to policy. For example, childcare gets women into the labor force and enhances the number of hours they work. Policies that affect the demographic transition can be large enough to actually offset what would be these very negative effect on potential outputs through the channel of labor supply,” said Mann.
The panel also looked at how automation, technology, and the policies on immigration can be leveraged to address challenges posed by demographic changes.
Advances in technology are helping broaden the number of people participating in the financial system, said David Lipton, the IMF’s first deputy managing director. He said data from the Fund’s Financial Access Survey lists 17 economies in sub-Saharan Africa where the number of mobile money accounts exceeds the number of depositors in commercial banks.
Perry Warjiyo, deputy governor of the Bank of Indonesia, said broader participation in the financial system makes monetary policy more effective.
“How can central banks do monetary policy if a large part of the population does not have access to finance?” said Warjiyo.
“Even though distributional policies are outside explicit mandates of central banks, I do think central bank policies have the potential to affect both income and wealth,” said Sharon Donnery, deputy governor of the Central Bank of Ireland.
Patrick Njoroge, governor of the Central Bank of Kenya, highlighted the crucial role of the regulatory environment to Kenya's success in digital finance.
The panelists agreed that central banks have a key role in enhancing inclusive growth, given the linkages between monetary policy effectiveness, financial inclusion, and stability.
What’s good for the United States is good for the world, US Treasury Secretary Steven Mnuchin said during a discussion with Christine Lagarde.
"If we can grow the US economy, that's not only good for the US worker, that's good for international growth, and it creates opportunities."
The IMF plays an important role in ensuring that "currency [and capital] systems are fair and aligned," Mnuchin told Lagarde.
"We are going to look to the IMF to evaluate certain things, whether it be in the monetary markets or others, and provide feedback to all of us. We will be a big supporter of working with you on the findings," said Mnuchin.
He said a "very uncompetitive" business tax code, and an overabundance of regulation had not been business friendly in the United States. Lagarde pointed out that the IMF has encouraged the US to simplify regulatory practices in the last few assessments of the economy.
Mnuchin also mentioned the need to simplify U.S. personal tax law.
"The tax code is just way, way, way too complicated, and we want to create a system where the average American can do their taxes on a postcard, not a major book," he said.
When questioned about how the U.S. would pay for these tax and regulatory reforms, he said the administration is "looking for reforms that pay for themselves with growth."
Technology is transforming both the way we live and the policies that guide government decisions. In the closing seminar of the Spring Meetings, a panel of technology and policy experts tackled what the digital revolution means for public finances.
Policymakers face a difficult balancing act to innovate and change with the times while protecting privacy.
“Technology can push the frontier of fiscal policy to new reaches and provide substantial opportunities for tax policy and systems,” Lipton said.
“Policymakers in the digital age can use technology to help them make the best choices for tax policy.”
Still, just talking about technology isn’t enough, said Andrew McAfee, co-director the Initiative on the Digital Economy at the Massachusetts Institute of Technology.
“If fiscal digitalization is not a government priority, it will not happen,” he said.
“The future of digitalization is happening now in India,” said Arvind Subramanian, chief economic adviser to the government of India. For example, currently 250 million people get their cooking gas subsidy paid digitally, directly into their bank accounts, with no leakage of funds and no corruption.
Uganda's Queen of Chess
Apart from the seminars, some of the public sessions showcased remarkable human stories, such as Uganda’s Queen of Chess, Phiona Mutesi, and one of the first titled female players in Uganda’s chess history. A conversation with Phiona shed light on her incredible personal journey and how she has become an inspiration to youth in her country, the continent, and around the world. Watch the conversation here.
You can see the full list of seminars, videos, and other Spring Meetings material here.